Cautious Consumers, Hurricane Spend Defines Home Depot’s Q3

The Home Depot‘s focus on the professional market remains unwavering even as U.S. consumers slow their home improvement spending.

That was the latest from the Atlanta-based retailer’s executives as they shared the company’s third-quarter 2024 results earnings Tuesday (Nov. 12).

“Despite continued macroeconomic uncertainty, our third quarter results exceeded our expectations,” Home Depot Chairman and CEO Ted Decker said in a statement. “As the weather normalized, we saw better engagement across seasonal items and certain outdoor projects, as well as increased sales related to hurricane demand.”

He added on an earnings call that “big ticket transactions fell 6.8% year over yearand we continue to see softer engagement in discretionary projects where clients use finance, such as kitchen and bathroom remodels.”

Faced with these fiscally cautious homeowners, the home improvement retailer has turned its attention to steady B2B demand among professionals, who have remained more resilient to economic uncertainty.

Over the past half decade, Home Depot has invested billions of dollars in improving its professional offerings, including new distribution centers, improved supply chain logistics and targeted online platforms for professionals. Now, in light of declining consumer spending, these investments look especially prescient.

Home Depot’s quarterly sales rose 6.6% year over year to $40.2 billion, and the company raised its full-year outlook on the back of the stronger-than-expected results.

Read also: Home Depot looks for B2B buffer against softening consumers Use

The pro market is inherently more stable

Unlike individual consumers who can wait for renovations or repairs, commercial customers and construction professionals are under contract deadlines to complete projects, keeping the demand pipeline relatively stable.

Key to Home Depot’s pro strategy is its digital overhaul. The company has tailored its website and app to offer professionals a faster and more seamless shopping experience, including features that allow workplace delivery, bulk pricing and personal accounts. This digital scale aligns with the pro segment’s need for efficiency – a necessity when every minute counts in a workplace.

To make sure professionals have the support they need, Home Depot executives said Tuesday the company has also increased its workforce training.

“We focus on building relationships with our most important professionals, including by to allocate more resources during peak periods,” executives told investors.

Employees in stores with a high volume of contractor traffic receive additional training on pro-specific product lines and services so they can answer technical questions and recommend custom solutions.

“We are pleased with the growth and strength of our pro ecosystem across 17 markets … delivering the best buying experience for all pro experiences,” executives said, noting that “lumber, plumbing and hardware were all above the company average for the most recent quarter.”

Home Depot’s focus on professional customers is not without risks. Building a pro-focused business requires investment in supply chain capabilities, as bulk and custom orders can strain logistics. Home Depot has addressed this by improving its supply chain through a network of flatbed distribution centers specifically addressed for professional jobs, allowing the company to fulfill more orders more efficiently.

Earlier this year, Home Depot spent $18.2 billion more acquire SRS, that works as a distributor for roofing companies and construction projects. The company has 760 locations, thousands of trucks on the road and has closed more than 100 acquisitions of roofing and construction suppliers.

Still, the most recent quarter marked the eighth straight quarter of negative comparable sales at Home Depot. The retailer expects to open about a dozen new stores this fiscal year, which ends in early February.

“This is a market, and markets eventually return to equilibrium,” Decker said on the call, referring to consumer demand for home improvement. “We just don’t think we’re quite there yet.”